A sustainable, fair and transparent financial sector depends among other things on fit and proper management and supervisory board members. The integrity and fitness of the persons and companies operating in the financial markets is essential for public confidence in these markets and the companies that operate in these markets. There can be no doubts regarding the propriety and fitness of persons who (solely or jointly) (co-) determine a financial enterprise’s policy and the persons who supervise such policy and its general state of affairs. This is why a management board member or a supervisory board member is assessed when nominated for appointment to a (new) policy-making position.
Assessment of management board members and supervisory board members
Persons who determine the policy of an enterprise either solely or jointly or who supervise such policy must be proper and fit for the performance of their tasks. Persons nominated for these positions at a financial enterprise are assessed by the AFM and/or De Nederlandsche Bank (DNB).
Who and what is assessed?
The AFM and DNB assess three categories of persons proposed for positions at financial enterprises: persons in charge of day-to-day policy, supervisory board members and co-policymakers. Co-policymakers are majority shareholders and other persons able to exercise material influence on the (day-to-day) management of the enterprise.
Depending on the type of enterprise, a person is assessed by the AFM and/or DNB.
The AFM assesses (proposed) persons in charge of day-to-day policy, supervisory board members and co-policymakers for propriety. In addition, the AFM assesses persons in charge of day-to-day policy and supervisory board members for fitness. Persons in charge of day-to-day policy in any case include management board members.
The propriety of persons in charge of day-to-day policy, supervisory board members and co-policymakers must be beyond doubt. The AFM establishes whether the propriety of the candidate is beyond doubt. This concerns intentions, actions and personal background that could be considered an impediment to taking up the position. The AFM focuses mainly on a person’s background. The circumstances relevant to a person’s background are listed in Annex C to the Decree on Conduct of Business Supervision of Financial Undertakings under the Wft (Besluit Gedragstoezicht financiële ondernemingen Wft) and Policy Rule 06-01 to the Audit Firms Supervision Act (Wet toezicht accountantsorganisaties).
Once the AFM has established that the propriety of an assessed person is beyond doubt, this finding continues to apply if the person in question transfers to another position in the financial sector. A change in the relevant facts or circumstances may be reasonable cause for a reassessment. The policymaker concerned and the enterprise are themselves responsible for notifying the supervisor of any changes to the relevant facts and circumstances.
All persons in charge of day-to-day policy and supervisory board members must be fit for their positions and the tasks that they fulfil. Based on the Financial Supervision Act (Wet op het financieel toezicht, or ‘Wft’) and the Policy Rule on Fitness 2012 (Beleidsregel Geschiktheid 2012, only available in Dutch) the AFM establishes whether a person is fit for their (proposed) position. The Policy Rule on Fitness 2012 clarifies what is meant by fitness and which aspects are considered as part of the fitness assessment.
The AFM assesses the fitness of a person on the basis of their curriculum vitae and the references obtained, among other things. An assessment interview may also be held with the person to obtain a more detailed impression. If there are facts and circumstances that give reasonable cause for a reassessment, the AFM may decide to reassess a person’s fitness.
Which enterprises does the AFM assess?
- a candidate is assessed by the AFM if their position is at one of the following enterprises:
- a provider of investment objects;
- a credit provider;
- an investment firm (including tied agents);
- a management company of an alternative investment fund;
- a holder of a qualified participation in a management company of an alternative investment fund;
- an investment company;
- a depositary for an alternative investment fund;
- a management company of an undertaking for collective investment in transferable securities (UCITS);
- a depositary of a UCITS;
- a financial services provider (advisers, intermediaries and authorised agents and sub-agents);
- a holder of an exemption under Section 4:3 Wft (for instance, a crowdfunding platform);
- a central securities depository (CSD);
- a data reporting services provider (DRSP);
- a market operator (a person or entity managing or operating a regulated market);
- an audit firm* (the AFM assesses only the propriety of (co-)policymakers in this case);
- An audit firm in a third country (the AFM assesses only the propriety of (co-)policymakers in this case).
DNB has a statutory obligation to request the AFM for its views when performing assessments for banks and insurance companies. The AFM and DNB therefore work together with respect to the assessment of banks and insurance companies. Both supervisors must approve the appointment of the candidate.
* With effect from 1 July 2018, management board members and internal supervisors (including supervisory board members) at PIE audit firms must be fit as well as proper for the exercise of their duties.
When does the assessment take place?
An enterprise wishing to appoint a (proposed) person in charge of day-to-day policy, a supervisory board member or a co-policymaker must notify the AFM to that effect in advance. Only after the AFM has carried out its assessment and issued a positive ruling may the enterprise actually appoint the person and register the appointment with the Chamber of Commerce. This also applies if the person to be assessed has previously been assessed by the AFM.
An initial fitness assessment is carried out in case of a proposed appointment of a person in charge of day-to-day policy and/or a supervisory board member at an enterprise subject to supervision. This also applies if or if an existing management board member or supervisory board member is proposed for appointment to another position or area of responsibility at the same enterprise. An initial propriety assessment is carried out when a person in charge of day-to-day policy, a supervisory board member or a co-policymaker is proposed for appointment for the first time.
Propriety and fitness are ongoing requirements. If changes to the relevant facts and circumstances occur, these must always be notified to the AFM without delay and must be assessed by the AFM. Examples include if a person has committed a driving offence or has a fine imposed by another supervisor. If this is not notified, or not notified in good time, this may be considered to be a supervisory record that may affect the (re)assessment of the person’s propriety and/or fitness.
The existence of a record does not automatically lead to the conclusion that a person’s propriety is no longer beyond doubt. The supervisors assess each record taking into account all the circumstances of the case and any other records.
In exceptional circumstances, the AFM may consider initiating a reassessment of a person in charge of day-to-day policy, a supervisory board member or a co-policymaker. This may affect that person’s fitness, propriety or a combination of the two. Such a reassessment is only carried out if facts or circumstances emerge that give reasonable cause to reconsider the outcome of the previous assessment.
The fee of a propriety assessment is €700 per person who is in charge of day-to-day policy, a supervisory board member or a co-policymaker. There is no fee for persons who have previously been assessed for propriety.
The fee for an initial fitness assessment depends on the type of financial enterprise. The fees for the fitness assessment are listed in the overview of non-recurring supervisory fees (Dutch language).
There is no fee for a person who has been previously assessed for fitness for the same type of financial enterprise with a similar package of services. In case of a new assessment for fitness, the fee for an initial assessment applies. This is the case for instance if the policymaker will take up a different position at the enterprise or will become a management board member at a different type of enterprise.
The fees for the propriety and/or fitness assessment are also due:
- if a licence application or other type of application is rejected or is proposed to be rejected
- if an assessment is terminated in the interim by the applicant
- if an assessment is not carried out within the allotted term and the AFM has rejected the application.
If the AFM has doubts regarding the propriety and/or fitness of previously assessed persons, the AFM may decide to carry out a full reassessment. In this case the AFM will charge the same fee applying to persons that have not been previously assessed.